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John R. Carroll[_3_]

wrote:
On Aug 28, 3:11 am, "John R. Carroll" wrote:

and less exploration in the US. So the gov would get less
money from leases.

Oh no.
Those leases would bring a price that would make your nose bleed and
they'd be worth it.
There would just be less interest in shutting out competitors.

--
John R. Carroll

Remember these are leases on land that is not known to have any oil.

No they aren't, and here is what you have to remember.
There are few transactions on Earth as highly leveraged as Oil and Gas
leases.

I can explain it if you aren't familiar with the mechanics but the basic
situation is that Oil companies are gambling money they raise through the
issuance of corporate bonds that the price of a barrel of oil will
appreciate faster than the general rate of inflation.
You don't have to be Einstien to conclude that Oil is likely to be worth
more 90 years from now and with a dwindling supply facing a surging demand,
you eventually get your payday. They lay claim to say, 1 billion dollars in
reserves for a few million dollars. Every dollar that the cost per barrel of
oil appreciates puts a billion dollars on their mark to market balance
sheets and they never need to pump a thing. With oil at $50.00 that means
all you need in order to make a killing is 2 percent inflation in oil. You
get your money out as the valuation of the company improves with time.

"Use it or Lose it" would put a quick end to that behavior and the markets
would be better off.
IOW, nobody really cares about the oil - it's the money.

--
John R. Carroll